At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Gridsum Holding Inc. (NASDAQ:GSUM).
Gridsum Holding Inc. (NASDAQ:GSUM) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds’ portfolios at the end of March. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Tecogen Inc. (NASDAQ:TGEN), Superior Energy Services, Inc. (NYSE:SPN), and Big 5 Sporting Goods Corporation (NASDAQ:BGFV) to gather more data points. Our calculations also showed that GSUM isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s review the fresh hedge fund action regarding Gridsum Holding Inc. (NASDAQ:GSUM).
What does smart money think about Gridsum Holding Inc. (NASDAQ:GSUM)?
At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards GSUM over the last 18 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Glen Kacher’s Light Street Capital has the biggest position in Gridsum Holding Inc. (NASDAQ:GSUM), worth close to $1.9 million, accounting for 0.1% of its total 13F portfolio. The second largest stake is held by John W. Moon of Moon Capital, with a $1.6 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism consist of Matthew Moskey and Friedrich Schulte-Hillen’s Athos Capital, Renaissance Technologies and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Moon Capital allocated the biggest weight to Gridsum Holding Inc. (NASDAQ:GSUM), around 1.5% of its 13F portfolio. Athos Capital is also relatively very bullish on the stock, earmarking 0.42 percent of its 13F equity portfolio to GSUM.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the first quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Gridsum Holding Inc. (NASDAQ:GSUM) but similarly valued. These stocks are Tecogen Inc. (NASDAQ:TGEN), Superior Energy Services, Inc. (NYSE:SPN), Big 5 Sporting Goods Corporation (NASDAQ:BGFV), and BioCardia, Inc. (NASDAQ:BCDA). This group of stocks’ market caps are closest to GSUM’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.5 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $4 million in GSUM’s case. Big 5 Sporting Goods Corporation (NASDAQ:BGFV) is the most popular stock in this table. On the other hand Tecogen Inc. (NASDAQ:TGEN) is the least popular one with only 1 bullish hedge fund positions. Gridsum Holding Inc. (NASDAQ:GSUM) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on GSUM as the stock returned 25.4% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.